There are many moving parts to any real estate transaction, and many people get snagged in one of these parts. With wholesaling these parts can trip you up very quickly.
The 5 Areas Newbies Trip and Fail in Wholesaling
Although this list is not all encompassing of a wholesale transaction, there are just a few parts that can cause you to fail as a real estate newbie.
1. Marketing Techniques
There are many techniques when it comes to marketing for wholesale deals:
- Direct Mail
- Bandit Signs
- Online Marketing (FB Ads, Website)
These are to name a few. Anyone can get started on their path to marketing but consistency is the key to success. I have seen, heard, and yes even I have fallen into the trap of starting and not completing my marketing plan. This is one of the biggest ways to slow momentum.
To ensure that you remain consistent, make sure that you have a reasonable budget for marketing alone. This should be an integral part of your business plan. There is no deals without any marketing, make sure you follow the path of many successful real estate investors by consistently following your plan.
2. Seller Conversation
Oh boy, this is the holy grail of fear for new investors.
The conversation with the seller can be a big disaster if you are not confident in yourself, what you have learned, and what services you are able to provide. The seller does not know that you are just starting out and many times they have no idea how a person can purchase a house for cash.
Make sure you have pre-scripted questions to ask. During the initial conversation you are just gathering information and gauging integrity and motivation.
The key is not to be afraid of making a mistake, if you trip your way through the first conversation you will eventually get better.
You can portray your confidence to the seller by doing your homework. After gathering some information from the seller; make sure you are familiar with the area and you communicate that to the seller.
A new approach I use; after I get the address I find a familiar landmark and ask them how far is their property away from that landmark. For example; if there is a large park in the community I ask the seller how far away is your property from “Lincoln Park”. This can also be used as a rapport building tool as well, they may begin to tell you a neat story about the park.
Here is another excellent way to increase your confidence when speaking with sellers; record your first couple of conversations and listen to them. This will help you identify the areas where you made mistakes and how to address them if another seller ask a similar question.
Put on your academy award winning performance; act like you been there done that.
Negotiating can be challenging but if you have thoroughly screened your seller you are aware of what is important to them. You have to drive that point home. Remember you are the buyer and they called you for a reason.
If they are serious they will be willing to play ball, you have to decide if they are ready to go all 9 innings or they are just trying to play the field.
Focus on some of the key reasons they called you, why do they want to sell without a Realtor, why do they need cash? Once you have identified the answer to these questions you have vital information in your negotiating toolbox.
One great tip I learned is that if you ask the seller what do you think the repairs will cost or how much you think your home is worth, normally their reply will be; “I don’t know that’s why I contacted you.”
That is great now you can respond by stating; “it is impossible for me to give you a solid number without seeing the house.” If they welcome you to come and see the house, do your negotiating there (in the worst part of the house), If they don’t welcome you to see the house normally they are wasting your time, or they are shady, and You Can’t Do A Good Deal With A Bad Person. (tweet-able)!!!
4. Inspection Period (IP)
This time is critical if you want to protect your initial investment (earnest money).
During this time you really need to work on getting your end buyer in place. Many newbies trip and fall during this time because they do not market the home right away.
If you are unaware of what an inspection period is; this is the time (normally 10-14 days can be longer) you have to inspect the property and make sure what you are buying is what you agreed to buy, if you don’t like the property or can’t sell it during that time you can cancel the contract and there is no harm no foul.
There are many ways to sell your property but one sure fire way to get the deal sold is to have great contacts with other investors.
This can be cash buyers or other wholesalers. Real Estate Investing is a business of networking, newbies feel as though no one will teach them or show them the way. The best way to start is to take action and trip and fail along the way.
You can sell your deal to cash buyers that you have met at the court house steps, by posting craigslist ads, or by subscribing to wholesalers mailing list. By taking these actions you will find who is buying or you will find who knows who is buying with cash.
Getting a property under contract there are many moving parts.
The topics in this article are introductory steps. There are many more steps that must be taking into consideration such as: how to estimate rehab cost, finding an escrow officer, how much earnest money to put up, how to negotiate with your end buyer. By continually allowing yourself to be exposed to failure will increase your capacity to learn. Remember its ok to trip and fail.
“There is only one thing that makes a dream impossible to achieve: the fear of failure.” Paulo Coelho
If you have an area where you have failed and it was not discussed please share, but add how it increased your capacity to learn.
Be sure to leave your comments below!
Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.